Nike stock crashed because earnings show why stores still matter

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Nike

the stock fell more than 7% on Friday after the sports company’s surprise loss in the fourth quarter, showing that even the strongest retailers with online platforms have been hit by pandemic-related store closures.

Nike (NKE) said it lost 51 cents in its quarter, while analysts had expected earnings of 4 cents per share. Hopes were certainly very high at the start of the report, with several analysts raising their price targets this week, saying that even if the company turns in a bad quarter, it would be a long-term winner.

So while the loss was a big miss, it’s no surprise that many bullish analysts are still optimistic about the company’s long-term prospects.

BMO Capital Market’s Simeon Siegel reiterated an outperform rating and $100 price target for the stock: “Although Nike will feel pandemic pressure, we expect it to go on the offensive, building a strategy for thriving after Covid-19, rather than simply surviving.

Stifel’s Jim Duffy reiterated a buy rating and price target of $110: “We see Nike in a unique position to capitalize on the shift to digital consumer engagement and continue to defend Nike stock as an asset. foundation for large-cap growth investors.”

And Susquehanna’s Sam Poser reiterated a positive note and $130 price target: “We believe short-term headwinds are masking Nike’s long-term potential.”

Granted, they might be right: Nike shares have done well due to its dominant position in the space, which has been boosted by the athleisure trend, which has only grown with home orders. The company also has a strong online presence and direct-to-consumer capabilities.

Yet the results show that even the most powerful retailers whose online sales are growing still need physical stores. Nike highlighted this issue in the press release, saying its results were “significantly impacted by physical store closures” across the world. During the conference call, the company said it expects subsequent quarters to improve, citing hopes that store reopenings will spur more normal supply and demand.

Data from Placer.ai showed that in January and February of this year, visits to Nike stores increased by 8% and 20.5%, respectively (before closings began in earnest in March). It’s a major source of revenue that Nike suddenly lost, and it’s not a stretch to assume that some shoppers who would have shopped in-store didn’t research the brand online.

We observed the same pattern when


Lululemon Athletica

(LULU) reported lackluster results earlier this month: the company didn’t post a loss, but it also missed high expectations and didn’t even bother to report same-store sales, blaming the pandemic.

Nike and Lululemon are analyst favorites with plenty of catalysts in their favor, both related to the coronavirus – which is forcing people to dress more casually and focus on health and workouts – and beyond . Yet even successful players who have seen online orders rise are struggling to overcome the loss of sales at physical sites.

So, as e-commerce becomes more and more important, it’s another reminder that not all stores will disappear.

Nike stock fell 7.2% to 94.13 at 3:06 p.m., while the


S&P500

fell 2.3%, and the


Dow Jones Industrial Average

fell 2.8%.

Write to Teresa Rivas at [email protected]

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